The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

Today, it seems like everything is going digital—but we still pay for most things the old fashion way. Humans made $15 trillion in retail transactions in 2013--$1 trillion of that was via e-commerce, $14 trillion was spent in physical stores and paid for with cash and credit cards.

More of that $14 billion chunk will slide to the digital side as smartphones continue to spread across the market. Research firm Gartner estimates that mobile payments will top $720 billion a year by 2017, up from $235 billion last year. Several tech giants are strategizing ways to capture the billions in transaction fees and troves of valuable consumer data at stake as money goes mobile. , Amazon, , PayPal (), Visa and --they all want win the digital wallet.

It’s a tough task. Payments in the real world are messier than online. You must convince the buyers and the sellers to use your product, install your systems into millions of contently changing locations, and you must educate both employees and customers how to use it. Even if you do all this, you have to get the customers to pay with their phones. Old habits die hard. You must prove that paying with a phone is better than cash and cards. As PayPal President David Marcus told me back in January: “It has to be the experience you have online today… You’ll get what you want really fast, pay really fast and get out. And the merchant will know more stuff about you, and that will make your experience better.”

To see how digital payments have progressed in the real world, I conducted a little experiment--I left my wallet at home to see how far I could get with just an iPhone. Inspiration came from my colleague Kashmir Hill who, last May, embarked on the more ambitious, difficult and inspired experiment of living solely on Bitcoin for a week. (I thought about running this mobile payment experiment for a week, but figured everyone would grow bored reading about me constantly buying pizza and coffee.)

Armed with my driver's license, Forbes ID and health insurance card (you never know) I embarked on my wallet-less day. Note: Android phones let you pay for things with Google Wallet (it works at Walgreens, Avis, REI and Marriott) but since iPhones don’t have near field communication capabilities, the Google option was off limits to me.

Morning Commute:

My first challenge was getting to work. New York subways and buses require metro cards, it was too far to walk and no one wants to see me on a bike. The answer: Uber. I opened the app, tapped my location and five minutes later was riding down Fifth Avenue in style.

Breakfast:

My regular coffee shop previously used technology from payment start-up Square that let you pay via Smartphone while leaving the phone in your pocket. But the coffee shop had disabled it. The reason? People were not tipping the baristas. The shop still offered the Square card reader--the owner told me that customers tended enter tips as they signed the Square check-out screen. I did not have any credit cards on me, so off to Starbucks I went.

As I wrote previously, Starbucks has the most successful app currently in the mobile payment game. About 10 million customers pay for their lattes with the app, making more than 5 million transactions per week. The app lets you pay with your phone, but it also enables customers to refill their Starbucks loyalty accounts with a few finger taps, offers instant discounts for free coffee or food and links to directly to Starbucks’ rewards program. I opened the Starbucks app, scanned the barcode on my phone in the laser reader to pay for a coffee and muffin—collecting my Starbucks loyalty points in the process—and was soon on my way.

Lunch:

My Uber ride to Forbes was more expensive than my usual subway ride. Looking to save money, I searched for deals on the PayPal wallet app and found a dozy—free lunch Thursdays at a coffee shop called the Bean. It's a PayPal promotion to encourage people to download their mobile app and to use it regularly. After checking into the Bean with PayPal I was given a grilled chicken sandwich, a large M&M cookie, and a bag of chips and a bottle of water— all free, no purchase necessary. Now that’s a solid perk.

I still wanted to test the Square app. I searched for local vendors (PayPal had many more options than Square did) and stopped at Argo Tea on my walk back to Forbes. I checked in with the Square app and walked out with a green tea. The cashier had been excited when I paid with Square, saying he always wanted to check someone out with the wireless feature: "You're only like the second guy to ever pay this way."

Snack:

I was hungry again by 3 pm. I searched the payment apps for a place to grab some food--most options were pizza, crepes and more coffee shops. Trying to be a little healthier and less caffeinated I chose Jamba Juice. PayPal has an order-ahead feature so I pre-ordered a juice and picked it 10 minutes later, bypassing the long, afternoon rush line. Here, the digital wallet offered a real advantage over cash.